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ASX:JHX
James Hardie Industries plc
Investment Summary
The fund managers believe James Hardie Industries plc represents a high-quality investment opportunity despite current fluctuations in the housing market. They note that the company maintains a strong market position in fibre cement siding and has successfully adapted its business mix, with ~65% of revenues from repair and remodel as opposed to new housing. The managers express confidence in James Hardie's ability to navigate through periods of softer housing demand while continuing to grow its market share. They highlight the strong operating margins maintained even amid declining volumes, supported by proactive cost management and a shift to higher-margin products. Despite recent acquisitions raising concerns about dilution, the overall sentiment is that James Hardie remains well-positioned for long-term growth, owing to its robust pricing power and ongoing demand for fibre cement in the face of housing shortages. Given the anticipated stabilizing of market conditions and the company’s historical resilience, they see potential for significant shareholder value creation in the years ahead.
Commentary From The Managers
Ten Cap
31 Mar 2025
$38.48
- James Hardie Industries (JHX) was the portfolio’s most significant contributor during the period.
- Ten Cap had a short position in JHX, based on a cautious stance regarding US housing.
- This stance was informed by a combination of industry feedback and macroeconomic data indicating endmarket weakness.
- Concerns were heightened by JHX's announcement of its acquisition of AZEK, a US-based decking business.
- The size of the transaction was unanticipated by Ten Cap.
- Ten Cap's positioning was influenced by observable signals such as the suspension of the share buyback program.
- There was also a noted increase in M&A-related recruitment activity.
Bennelong Long Short Equity Fund
31 Mar 2025
$38.48
- James Hardie announced the acquisition of Azek, a synthetic/composite decking supplier in the US known as TimberTech.
- Bennelong Long Short Equity Fund notes that James Hardie achieves excellent returns and growth from its legacy fibre cement business, dominating the fibre cement segment with a 90% market share.
- High returns, along with high organic growth and dominant market share, are rare attributes for businesses.
- Despite Azek's rapid growth, it operates in a more competitive segment, with lower returns than James Hardie.
- The fund believes that JHX's agreement to pay a high price for Azek dilutes the quality of their core business.
- This dilution creates a poor risk/reward trade-off for JHX shareholders.
- The market has reacted negatively to this acquisition, punishing JHX's stock for the perceived risks involved.
Ten Cap
31 Jan 2025
$54.63
- Ten Cap has taken profits in James Hardie (JHX).
- Continued weakness in the US housing market due to higher mortgage rates has led to a reduction in their position.
- Despite admiring the quality of the business, they note that it is taking time for US housing activity to recover.
- They anticipate a better entry point as market expectations around inflation and housing demand stabilize.
Blackwattle Investment Partners
30 Nov 2024
$56.31
- James Hardie Industries (JHX) contributed positively to Fund performance last month.
- Reported steady revenues in Asia Pacific and European operations due to robust pricing.
- In North America, demonstrated good cost discipline and margin management despite a 5% revenue decline.
- Chronic underbuild of new housing in the US supports long-term growth.
- Continued market share gains for fibre cement against vinyl and other substrates.
- Confidence in JHX’s dominance in fibre cement products enhances growth outlook.
- Anticipation of interest rates normalising bolsters long-term growth prospects.
- Average adjusted return on capital employed of 45% over the last 5 years indicates potential for significant shareholder value creation.
Blackwattle Investment Partners
31 July 2024
$54.67
- James Hardie (JHX.AX) reversed from a significant detractor to a large contributor to Fund performance in July, gaining +16%
- Previous concerns included weaker demand from the US repair and remodel market, higher input costs, and elevated operating expenses
- The prospect of a US rate cut is expected to spur housing activity, renewing interest in James Hardie and similar homebuilder stocks
- Blackwattle Investment Partners remains confident in the long-term prospects for JHX
- Strong pricing power and market share gains against alternative siding materials, such as vinyl, support this confidence
Blackwattle Investment Partners
30 Apr 2024
$54.21
- Blackwattle Investment Partners notes a 12% decline in the fund's position in James Hardie (JHX) over the past month.
- The rise in the US 10-year bond yield to 4.6% has resulted in higher 30-year mortgage rates reaching 7.2%, the highest since 2009.
- This increase in mortgage rates is expected to dampen new home construction and renovation markets temporarily.
- Nevertheless, there are signs of pent-up demand due to a 3 million home shortfall in the USA since the GFC.
- The aging housing stock, with 35% built pre-1969 and 14% pre-1979, indicates a future need for new siding.
- As rates ease, an upturn in activity for James Hardie is anticipated.
- Rising input costs are a concern but are viewed as a short-term headwind.
- James Hardie’s scale and trusted brand status may provide a high degree of pricing power as an offset to these costs.
- Blackwattle Investment Partners prefers to use market volatility to adjust their position size based on intrinsic value assessments.
- Investor focus on short-term quarterly results is seen as an opportunity for long-term investors.
L1 Capital
30 Sept 2023
$40.70
- James Hardie (Long +17%) shares rose after announcing first quarter earnings well above market expectations.
- Strong second quarter earnings guidance has contributed to investor confidence.
- L1 Capital continues to hold due to share price exposure built on weakness earlier in the quarter.
- Portfolio benefited from a 17% share price rise during the period held.
- Despite uncertainty regarding rising interest rates and their impact on housing and remodeling demand, the outlook remains positive.
- Company maintains strong operating margins even with potential declines in fibre cement volumes.
- This resilience is attributed to diverse end-market exposure, product mix shift towards higher-margin products, and proactive cost management.
L1 Capital
30 June 2023
$39.75
- James Hardie (Long +25%) shares rose following Q1 FY23 earnings guidance exceeding market expectations.
- Uncertainty remains regarding the impact of rising interest rates on housing and repair/remodel demand.
- The company expresses confidence in maintaining strong operating margins despite potential declines in fibre cement volumes.
- This resilience is attributed to more stable end-market exposure and a higher-margin product mix.
- Proactive cost management initiatives further support their operational stability.
- L1 Capital believes James Hardie is well positioned to navigate current softer demand and expects continued growth at an above-market rate for years.
L1 Capital
31 May 2023
$37.89
- James Hardie (Long +13%) shares rose after announcing Q1 FY23 earnings guidance well above market expectations.
- Uncertainty remains regarding the impact of rising interest rates on housing and repair/remodel demand.
- Company confidence in maintaining strong margins despite expected decline in fibre cement volumes.
- Driven by resilient end-market exposure, product mix shifting towards higher-margin products, and proactive cost management.
- L1 Capital continues to believe James Hardie is well placed to manage through current softer demand and achieve above-market growth for years to come.
L1 Capital
31 Jan 2023
$31.45
- James Hardie (Long +19%) shares rose due to improved housing sentiment.
- U.S. homebuilders reported a sharp increase in new housing demand in January.
- U.S. 30-year fixed mortgage rates eased to around 6% after peaking above 7% in November 2022.
- Market leader in fibre cement siding, James Hardie has grown its market share in the U.S. for over 20 years.
- The business mix has evolved, with ~65% of revenues from repair and remodel and ~35% from new housing.
- L1 Capital believes James Hardie is well placed to manage softer new housing demand and grow at an above-market rate for many years.
L1 Capital
30 Sept 2022
$30.84
- L1 Capital notes that James Hardie (Long -8%) shares have declined due to expected sharp correction in U.S. housing demand.
- 30-year fixed mortgage rates have increased by 100bps to nearly 7%, raising fears of a U.S. recession.
- James Hardie remains market leader in fibre cement siding with over 20 years of market share growth in the U.S.
- The business mix has evolved, with approximately 65% of revenue from repair and remodel exposure and 35% from new housing.
- L1 Capital attended the company’s investor day in New York and held meetings with senior management, revealing confidence in James Hardie's market share growth and business resilience.
- The current market correction presents an opportunity to invest in a high-quality company with significant structural growth potential.
- James Hardie trades at a FY23 consensus P/E of ~13x, compared to its long-term average of 20-25x.
- L1 Capital believes the market assumptions imply a ~40% decline in earnings, akin to the GFC impact, although the current business mix is less cyclical.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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